Small businesses did a bit more hiring and paid workers more last month, according to a report released Tuesday by payroll provider Paychex.
The March 2023
The hiring slowdown shouldn't come as a surprise, given the layoffs in recent months, especially at large technology companies. "The really encouraging thing is that small business employment is sticking in there," said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. "This past month, the increase was much lower than last month, but it's nevertheless an increase. We've had it going up for three straight months. This past month, the increase was much lower than last month, but it's nevertheless an increase of 0.06%. That's very encouraging, given what you're hearing out there regarding the technology and enterprise companies. We were pleased to see that."
Smaller businesses are still having difficulty with the labor shortage.
"Part of the reason for the slow growth in that index for quite some time has just been that businesses really couldn't, and probably still can't, find people," said Fiorille. "The pool of labor out there has increased as big companies have laid off, or aren't hiring as much, and as consumers' balance sheets start to go down due to the unwinding of all the COVID money."
Workers' hourly earnings average increased 4.64% to $31.40 since this time last year. Weekly hours worked rose 0.21% year over year to 32.63, but one-month annualized growth moderated for the first time since August 2022. Following several months of moderation, national hourly earnings growth increased slightly to 4.64% in March as one-month annualized growth reached 5.34%.
"We have been seeing wages continuously growing, but that growth has been slowing for quite some time," said Fiorille. "This month, what we saw picked up a little bit is the one-month number. Annualized it was 5.34%, which is pretty strong. We think that a lot of companies are getting ready and reacting to what we think is a lot of minimum wage increases that are going to be put in. Maybe they're trying to frontload that and get ahead of that as well."
The national jobs index has risen for three consecutive months, with the South continuing to lead the country. North Carolina's growth rate on hiring slowed 0.42% in March, but continued its nine-month streak as the leading state for small business hiring. Small business employment growth remained strong in Houston, putting the city in first place among metropolitan areas for the fifth consecutive month.
"The South is continuing to be the strongest," said Fiorille. The outperformer for the states is North Carolina, and then in the metros Houston has really jumped up and has been very strong from a city standpoint."
Leisure and hospitality led the way among sectors with hourly earnings growth at 5.96% for the fifth consecutive month, despite falling below 6% for the first time since April 2021. The "other services except public administration" category came in second place.
"Other services, and leisure and hospitality continued to be kind of the main drivers of sector growth," said Fiorille.
He pointed out that the U.S. Bureau of Labor Statistics released its monthly
"The JOLTS report came out this morning and showed the number of job openings really dropped this month, and then they even adjusted down last month," said Fiorille. "People are thinking that the Fed's increases are starting to have an impact, although if you look at the small business index, the openings in that one to 50 space went up, which is different than the bigger companies."
With the tax deadline approaching in two weeks, he's advising small businesses to keep an eye out for tax incentives offered by their states. "A lot of states have various tax credit programs that have emerged," he noted.
